Tax-reform program to fill backlog in infrastructure, education, health

The proposed com­prehensive tax re­form program, if ap­proved in toto, will let the Duterte administration improve 44,000 kilometers of national and local roads; build 6,700 health centers and hire nearly 10,000 doctors, nurs­es and midwives; and attain 100 percent health insurance coverage, along with building 80,000 more classrooms and hiring 157,000 teachers over the next five years, according to Finance Secretary Carlos Dominguez III.

Dominguez said Pres­ident Duterte’s goal of lib­erating six million Filipinos from poverty by 2022 would be better achieved by im­plementing these initiatives, because raising productivity and improving competitive­ness will, in turn, create more and better jobs—and thereby lift the economic status of the country’s impoverished sec­tors.

However, he said, if the tax reform program fails to get approved in its entirety by the Congress, the six million Fil­ipinos representing the 21.6 percent still trapped in ex­treme poverty will be doomed to their fate, GDP expansion will not be sustained at 7 per­cent, the economy will suffer a credit ratings downgrade, and the benefits of continued high growth will remain ex­clusive to the rich.

“All the above will not be possible if the tax re­form package is not passed,” Dominguez said.

The first package of the comprehensive tax reform program submitted to the Congress last September under the Department of Fi­nance (DOF)-proposed Tax Reform for Acceleration and Inclusion Act aims to gener­ate a net gain of P174 billion, equivalent to 1 percent of the GDP in 2018.

Dominguez said the con­gressional approval of the tax reform plan would allow the government to achieve 100 percent enrollment and com­pletion rates, build 80,066 more classrooms and hire 157,412 more teachers be­tween 2017 and 2020, with the end in view of attaining the ideal teacher-to-student ratio and classroom-to-stu­dent ratio under more con­ducive learning environments for our youth.

In health care, the DOF-proposed tax reform plan will enable the govern­ment to upgrade 300 local hospitals, build 6,793 new barangay and rural health centers, and hire an addi­tional 2,098 doctors, 4,560 nurses, and 3,328 midwives between 2017 and 2020.

“It will allow us to achieve 100 percent PhilHealth cov­erage at higher quality of ser­vices,” Dominguez said.

In infrastructure, this will ensure that the government has enough funds to con­cretize 3,714 kilometers of national gravel roads, some 10,473 kilometers of national asphalt roads, and 30,209 ki­lometers of local gravel roads, along with irrigating some 1.3 million hectares of land and providing some 7,834 isolat­ed barangays and 23,293 iso­lated sitios with road access, he added.

Dominguez said the growing uncertainty in global prospects as a result of recent external developments means the country would “need to prepare well and build a solid fiscal buffer to keep us strong when the storm comes.”

He said estimates done by the Asian Development Bank (ADB) show that the country needs to invest at least P610 billion annually in infrastructures, which is a feasible target if the govern­ment can provide a business friendly environment to in­vestors.

This means that from 2016 to 2022, the Philip­pines should spend a total of P1.073 trillion on urban and rural infrastructure; and another P718 billion on ed­ucation and P139 billion on health; and P268 billion on social protection, welfare and employment.

“We must be fiscally pre­pared to invest more heavily in our human capital and in much needed infrastructure,” Dominguez said.

The DOF secretary raised a dire scenario should the Congress choose to pass only the tax package’s popu­lar component , which is the reduction in PIT rates with­out the corresponding reve­nue-enhancing measures.

“Without improving on our revenues, many of our children will continue walk­ing hours to get to school and our classrooms will continue to be packed beyond capaci­ty. The poorest Filipinos will continue to have little or no access to health services. Our farmers will be unable to raise their productivity and thus remain poor,” he said.

Along with this bleak scenario, the Philippines will most possibly suffer a cred­it rating downgrade as the government will be forced to rely on borrowings to man­age the deficit, which means P30 billion in additional debt costs; consumers will have to absorb the consequences by having to cope with a per­manent P2-depreciation of the local currency against the dollar, along with a two-per­cent increase in interest rates; and public funds for class­rooms, health centers and rural roads will be in short supply, Dominguez said.

“If we fail to pass the rev­enue enhancement measures, we will lose the growth mo­mentum that took us years to build. We will face the specter of large budget deficits and move closer to a debt crisis,” he said.

Dominguez likewise not­ed that without the tax reform package, growth will not only be slower but exclusive, with the rich continuing to corner the wealth created and the poor kept out of the national economic mainstream.

The government’s goal of reducing poverty rates from the current 21.6 per­cent to 14 percent to bring the Philippines at par with Thailand and China in terms of per-capita gross national income by 2022 will flounder.

Thus, the 2040 vision of eradicating poverty and mak­ing the country a high-in­come country like what South Korea and Malaysia are already today, will likewise fail, Dominguez said.

“In a word, the vision of achieving prosperous country status with zero poverty by 2040 will not be achieved,” he said.

“This is the time to break the vicious cycles of the past and carve a new path to a prosperous future for all our people,” Domin­guez said.